April 24, 2008

eBay Sues Craig's List on Minority Shareholder Claims

San Jose, Calif -- April 22, 2008 — In order to safeguard its four-year financial investment in craigslist, eBay (Nasdaq: EBAY; ) today filed a lawsuit in the Court of Chancery of the State of Delaware challenging recent transactions implemented by craigslist's board of directors, consisting of Craig Newmark and Jim Buckmaster.

In 2004, after negotiating the transaction with craigslist's board, eBay acquired a minority ownership interest in craigslist of 28.4 percent.

In January 2008, however, Newmark and Buckmaster adopted measures that, among other things, unfairly diluted eBay's economic interest in craigslist by more than 10 percent. By taking these unilateral actions, eBay believes that Newmark and Buckmaster breached their fiduciary duties in violation of Delaware corporate law.

"The recent actions by the craigslist directors have disadvantaged eBay and its investment in craigslist," said Mike Jacobson, eBay Senior Vice President and General Counsel. "Since negotiating our investment with craigslist's board in 2004, we have acted openly and in good faith as a minority shareholder, so we were surprised by these recent unilateral actions. We are asking the Delaware court to rescind these recent actions in order to protect eBay's stockholders and preserve our investment."

The complaint is being filed under seal because some of the information about craigslist contained in the complaint is governed by confidentiality restrictions.

But yesterday, the unlikely union reached an impasse when eBay filed a lawsuit against closely-held Craigslist in the Delaware Court of Chancery for improperly diluting its stake. In a statement, eBay said that in January Craigslist executives took actions that “unfairly diluted eBay’s economic interest” in the company. EBay did not specify what those actions were but said they diluted its 28.4% stake in Craigslist by more than 10%. Click here for the NYT story.

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